4755 · Rakuten Group

Will it survive?

• Can it pay its interest? 0.2×
  Does not cover its interest
  Operating income ¥14.4B ÷ interest expense ¥86.7B
  What this means

  A full year of operating profit didn't cover the interest bill. This is the zombie zone: the business depends on refinancing, asset sales, or forbearance to service its debt.

• How heavy is the debt, net of cash? +¥4.04T
  Net cash
  Cash ¥5.84T − debt ¥1.80T
  What this means

  Cash and short-term investments exceed every dollar of debt by ¥4.04T, on net the company owes nothing, and can act from strength when others can't. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? —
  Not enough data
  What this means

  The filing data didn't include the inputs for this check.

Is it a good business?

• Return on invested capital —
  Not meaningful here
  Invested capital (¥3.04T) = debt ¥1.80T + equity ¥992.4B − cash
  Industry peers: median 21%
  What this means

  Invested capital is near zero or negative, usually years of buybacks pulling equity down. ROIC explodes or flips sign and stops meaning anything. Judge this one on Owner Earnings instead.

• Owner-earnings margin 17%
  High through the cycle
  8-yr median margin, range -29%–61%; latest ¥358.4B = operating cash ¥424.1B − maintenance capex ¥65.7B
  Industry peers: median 36%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 14% of revenue this year, a 17% median across 8 years.

• Are earnings backed by cash? ¥424.1B
  Loss, but cash-generative
  Net income (¥177.9B) · cash from operations ¥424.1B
  What this means

  The company reported a net loss, so a conversion ratio isn't meaningful. What matters then is whether operations still threw off cash, here, they did.

How is the cash used?

• Where do the earnings go? 0%
  Reinvests most of it
  Dividends + buybacks ¥1M ÷ Owner Earnings ¥358.4B
  What this means

  Of ¥358.4B Owner Earnings, ¥1M (0%) went back to shareholders, ¥0 dividends, ¥1M buybacks. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? 0.20×
  Harvesting
  Capex ¥65.7B ÷ depreciation ¥320.5B
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 3 of 10
  What this means

  Lost money in 7 year(s), look at what happened there before trusting the average.

• Return on capital ≥ 15% 2 of 4 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 9% → −2% (3-yr avg ends)
  What this means

  Through the cycle the operating margin slipped — about 9% early to −2% lately, median 1% — competition or costs are biting in.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Owner earnings growth +24%/yr
  What this means

  Owner earnings grew about 24% a year over the record.

• Worst year 2022 · −19.3% op. margin
  What this means

  Operations went underwater in 2022, understand why before trusting the good years.

• Share count +4.7%/yr
  What this means

  The share count is rising, dilution works against you on a per-share basis.

• Dividend record rising
  What this means

  Paid and raised the dividend across the record, the continuity Graham prized.